Market looks to govt. for impetus in 2018

• Listing of non-strategic SOEs key to improve market liquidity 
• Return of state-controlled institutional funds vital to create confidence
• Net foreign inflow in 2017 touches Rs.18bn; local investor interest tepid

The performance of the Colombo bourse in the year 2018 will depend a lot on the execution of the plans already proposed by the government, including the listing of state-owned enterprises (SOEs), the stock market stakeholders opine.

“The listing of state-owned enterprises will solve the liquidity issue in the market and will have a profound impact,” says Colombo Stock Brokers’ Association Immediate Past President Ravi Abeysuriya.

He also wants to see the state-controlled institutional investors, such as the Employees’ Provident Fund, National Savings Bank, Sri Lanka Insurance General and Life funds, to return to the market, which will in turn give the local investors confidence to re-enter the market. 

“In terms of foreign investor perspective, 2017 was a good year. But otherwise it was a pretty bad year. The government needs to execute the already proposed plans such as SOE listing for the market to pick up in 2018,” said Abeysuriya. 

The Colombo bourse saw a net foreign inflow of Rs.17.7 billion in 2017, as opposed to a meagre Rs.383.5 million a year ago. The 2017 number would have even been higher if not for the acquisition of Singer Sri Lanka by Hayleys PLC from foreign owners. 

The total foreign investor contribution in 2017 was 47.1 percent.

But other than the foreign interest due to relatively attractive valuations, there was hardly anything exciting about the market in 2017. Both the All Share Price Index and S&P SL 20 gained, albeit unimpressively and the average daily turnover was little over Rs.900 million. 

For the whole year, there were only two equity IPOs, one equity introduction and five debt issues, which raised little over Rs.21.3 billion. The listed corporates through rights issues also raised about Rs.44.7 billion. 

The market capitalisation was Rs.2.9 trillion or US $ 18.9 billion with 296 listed companies. 

“The only way to trigger growth at the Colombo Stock Exchange is more state participation by way listing state enterprises and aggressive investments, particularly by pension funds,” a stockbroker told Mirror Business on the grounds of anonymity, echoing Abeysuriya’s sentiments.

He said a large number of newly created international funds are turning a blind eye towards Sri Lanka as the Colombo Stock Exchange does not offer something attractive in scale that they can come and invest.

“If some good SOEs come to the market, they will definitely look at Sri Lanka,” he said. 

Similar to at least previous couple of budgets, budget 2018 also proposed the listing of non-strategic SOEs, allowing the state to raise equity and debt from the capital markets and at the same time improving liquidity at the Colombo bourse. 

However, the execution of such proposals, as the history has shown many a time, remains extremely politically challenging. The present government being a coalition does not help either.